The enigma of Chinese socialism (2/3)

Part 2  - Market Socialism

To understand what is the relationship between the Chinese socialist model with its economic growth, it is necessary to understand its change of direction between the late 1970s, early 1980s, when they began a course of steady growth, still in force.

In the 1970s, there were several changes worldwide, led to such directions that the Chinese began to follow. The geopolitical contradictions with the USSR led to the removal of China from the Soviet orbit. For a calculation of pragmatism in foreign policy, the U.S. approached the Chinese to isolate the main Russian rival, and thus supported the People's Republic of China in 1972 for taking a seat on the Security Council of the UN, once occupied by Taiwan. The world economy also underwent important changes in the period: in 1971, U.S. President Richard Nixon ordered the inconvertibility of the dollar to gold, and in 1973 and 1978, two world oil crisis broke out. The developed capitalist countries initiated a phase of strong macroeconomic adjustment of liberalizing bias, while the periphery continued to grow in debt (in Brazil there were the "economic miracle" and II PND).

Internally, China went through the Cultural Revolution (1966-1976), in which the company was consumed in sectarian ideological disputes, and the economy did not advance, but went back in many ways. The deaths of Mao Tse Tung and Zhou En Lai in 1976, led to a reformulation of the socialist program of the CPC in 1978. In its Congress, the CPC reaffirmed the persistence in the socialist path, seeking to strengthen the democratic and popular way under the leadership of the party. While acknowledging Mao with Marx and Lenin as their theoretical frameworks, CPC made the criticism of the errors and excesses committed by the Chinese leader.

The main changes, however, occurred in the economic model. Four modernizations were launched, focused on industry, agriculture, defense and science & technology. The planned system and ultra-centralized structure inherited from the Soviet era, would be progressively modified as national private capital was to develop, while the country has become attractive for foreign capital. This opening would be coordinated in a slow and gradual way, with the expansion of large agricultural projects, goods for mass consumption, energy, transportation, education, public health and culture. The Stalinist economic model would therefore be gradually replaced by a Leninist model based on the NEP (New Economic Policy), with the difference that, since then, the Chinese have introduced the long-term planning for three, five or even ten decades.

The new Chinese economic model, led by Deng Xiaoping, identified that the market existed long before capitalism, and that even in a socialist regime in transition to communism, it would be impossible to abolish it altogether. In their conclusions, the Chinese leaders chose to benefit from the best of what the market could offer, while the big decisions were transferred to the private sector. The market would then be the regulator of prices by supply and demand, and the State would correct their deviation and plan the priority. This is what they called the "market socialism" or "socialism with Chinese characteristics." Obviously the leaders knew that it would be rebuilt with a national bourgeoisie, and the new contradictions that might result. 

In the 1980s, new factors of the world situation contributed to the success of  the "market socialism". The second oil shock, Reagan´s strong dollar policy, rising international interest and the "resumption of U.S. hegemony" have damaged the indebted developing countries that had been the center of attraction for capital. The debt crisis that resulted in the Mexican moratorium in 1982 shook the confidence of major investors in the then dynamic Latin-America, and Southeast Asia gradually became recipient of foreign investment. Japan developed by high technology, and the Asian Tigers Hong Kong, Malaysia, South Korea and Taiwan - with the cheap cost of labor, fiscal and exchange rate policy focused on competitiveness in exports - gained more participation in trade and world production. Taking advantage of favorable winds, China began to adopt policies similar to the Tigers through the SEZs (Special Economic Zones), located in the Eastern coastal region. They were characterized by a markedly controlled opening to foreign capital through state participation in joint ventures, aimed at exporting industrial production. 

While these reforms were occurring in China, the Soviet Union lived in the period of Glasnost, Gorbachev and the political and economic openness. Unlike China, however, the Soviets could not keep control of the transition, and did it quickly, and the results were catastrophic for the power to rival the U.S. global hegemony. The fall of the Berlin Wall in 1989 and the end of the USSR in 1991 made Russia back in geopolitical influence, a role that China would progressively assume. To avoid further internal risks, the Chinese leadership did not hesitate to violently repress the movement pro-Westernization, as the incident in 1989, also known as the “massacre of Tiananmen Square".

With the constitutional changes in the 1990´s, the system of property, that was previously restricted to state and collective,now has new forms like cooperatives, and private local and foreign enterprises. The state monopoly which had lost it, started to compete with private companies and even other state. The economy continued to grow, and to avoid the rural exodus and the swelling urban sprawl, various internal migration regulations were created, as well as a severe birth control limit. The labor and social security conditions in China have improved, and there were several programs for students and Chinese researchers to be sent to the main intellectual centers in the world to learn new technologies, while local engineers copied the plans of the factories that were installed on their territories. The world was beginning to see the rising Asian giant, and one step of this recognition was the peaceful return, in 1997, of Hong King to China, which incorporated the Tiger capitalist model, adopting the "one country, two systems" strategy.

When the twenty first century began, we could see a crisis in the U.S. hegemony, which had its weaknesses exposed on September 11, and still had to deal with the wear of two wars in Afghanistan and Iraq. China has achieved the desired entry into the WTO, but relations with the U.S. were not good in the period, due to American support for the separatist movement of the Dalai Lama and the supply of high-tech weapons to Taiwan. Despite these confrontations in the political arena, Chinese economic growth is largely a result of commercial and financial relations with the United States. This is because the Chinese production is maintained largely by the high standard of American consumption, supported by their external deficit. For this cycle to be kept alive, China funds much of the deficit, while accumulating foreign exchange reserves exceeding US$ 1 trillion. 

In the last decade, therefore, China has had much to celebrate. In 2002, it succeeded in eradicating the entire population below the poverty line from official figures, which were 67 million people only in the previous year. Although 70% of the population remains in the countryside, major cities have serious problems of pollution, supply and infrastructure. In 2007, the Congress of the CPC determined a new direction for the country, in order to correct these weaknesses. With the 2008 Olympics, the Chinese had the opportunity to present the New China - modern and developed -  to the world, but still full of contradictions. The crisis of 2008/2009 could have meant a blow to the Chinese project, but instead, it designed the country along with other emerging countries into a new age of global governance and economic power. However this will be the theme of the last article of the trilogy.

Source: http://www.watershed.com.br/article/165/the-enigma-of-chinese-socialism-23.aspx